The Alternative Minimum Tax

THE ALTERNATIVE MINIMUM TAX

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Mr. DURBIN. I would like to ask the Senator from Oregon through the Chair--first, I would like to tell him that about 10 or 15 years ago, in my hometown, my accountant in Springfield, IL, passed away, a man who had done the tax returns for my wife and me. After years of being a lawyer, I thought to myself: I can do this. I will fill out my own income tax return.

I went back home Sunday afternoon and sat down to fill out what is a pretty simple income tax return for a Member of Congress. It took me 3 or 4 hours, and then I had to come back to it the next day, and I filed it. I then found out I had made several glaring errors. This was before TurboTax, H&R Block's Web site, and all the rest of these things. But I thought: Let me do it myself. I tell the Senator from Oregon that I have an abiding respect for what he just said after that humbling experience.

I would like to ask the Senator whether he thinks we would have more impetus for simplifying tax returns if Members of Congress had to file their own tax returns, prepare their own tax returns, and then submit to the American people the fruits of their labor as to whether they made mistakes?

Mr. WYDEN. Mr. President, I thank the distinguished Senator from Illinois, who as usual is being a bit too logical. The fact is, if Members of the Congress had to go through this--because we will have a lot who are paying the AMT, many who have investments of a variety of sorts--I believe that alone could trigger a bit of a revolution around here. I think the challenge is for people to see just the kind of tax hole we have dug ourselves into over the last 20 years--14,000 changes, needless complications.

I really do not see how a middle-class person can get ahead with a Tax Code that discriminates against work. The Senator from Illinois has been a champ for the middle-class kind of family.

Here is the way it works. If a cop in Chicago gets a $500 pay raise, that cop pays 25 percent of his or her pay raise to the Federal Government in income taxes, and then they pay Social Security payroll taxes on top of that. If somebody in downtown Chicago makes all their money from capital gains and investment, they pay 15 percent on their capital gains and no Social Security payroll tax.

Again, I have tried to emphasize that I am not for soaking anybody. I believe in markets, and I believe in creating wealth, as I believe Senators of both political parties do. But as the Senator from Illinois has pointed out, if Senators were really forced to deal with these kinds of situations themselves, starting with the Tax Code complications, when they fill it out on their own, that could start a revolution around here.

I believe this is a bipartisan opportunity that comes along rarely.

I will wrap up with one last point.

I believe the Social Security reform showed a lot about what our citizens think about a vital American program. A lot of Americans love Social Security dearly, and there are a lot of rallies outside the offices of Members of Congress, with folks carrying signs saying, ``I love Social Security.'' I tell colleagues that there will be no rally outside your office with people carrying signs saying, ``We Love the IRS Code.'' This is something which could be reformed, could be changed on a bipartisan basis.

Mr. DURBIN. Mr. President, if the Senator will yield for one question which I think gets to the concern people have about tax reform, it seems like a zero-sum game in this respect: If you end up lowering the taxes paid by someone in order to keep the same return to Government in revenue, you have to raise the taxes for others.

So I ask the Senator to step back from his proposal for a minute. Who are the winners and losers?

Mr. WYDEN. The Senator asks a good question. First, a quick word on my proposal, which is available from the Congressional Research Service and Jane Gravell, the top economist who is there to discuss it with Senators. It would actually reduce the deficit by about $100 billion over 5 years, making downpayments in terms of deficit reduction.

But here is what the distribution profile looks like in terms of our legislation. We believe that upwards of 70 percent of the people in this country would get a solid tax cut. These are middle-class folks making $60,000, $70,000, $80,000, and $90,000. Essentially, what the Congressional Research Service has shown is that millions of middle-class people would get relief. It is upwards of 70 percent. We have calculated that about 15 percent of the people in this country would be treated about the same.

For example--and it is matter of public record, and I can discuss it--I have a Senate wage of about $160,000, and I have a bit of investment income. I come out about the same under my proposal as under the status quo. We have to make 6 or 7 percent of the people in this country who make virtually all their income from capital gains and dividends--not from wages--pay a bit more.

So that is what the distributional effect of one actual proposal looked like. That was again very similar to what happened in 1986 when Ronald Reagan, after having started his Presidency with a set of tax changes--and my colleague will remember they were largely for investment--did an about-face and passed a reform proposal that gave real relief to middle-class people.

I want to close by thanking the Senator from Illinois, who I know has a great interest in this subject and has been a strong champion of the middle class.

The PRESIDING OFFICER. The Senator's time has expired.

Mr. DURBIN. Mr. President, I suggest the absence of a quorum.

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